Photo Credit: Ledger Insights
Non-fungible token (NFT) sales have dropped to new lows amid a broader downturn in the crypto market.
Data research firm Chainalysis reports that NFT sales totaled $1 billion in June. That’s their worst performance since June 2021, when sales were $648m. NFT sales reached their peak in 2022, with sales totaling $12.6 billion that month.
“This decline is definitely linked to the broader slowdown in crypto markets,” Ethan McMahon, a Chainalysis economist, told The Guardian. “Times like this inevitably lead to consolidation within the affected markets. For NFTs, we will likely see a pullback in terms of the collections and types of NFTs that reach prominence.”
NFTs rely on blockchain technology, which is a decentralized ledger to track ownership. Most NFTs are based on the Ethereum blockchain, but music NFT companies like LimeWire and Napster are looking at proof of stake blockchains like Alogrand.
At its peak in January 2022, the NFT market was attracting huge sums as buyers lined up. A digital collage by the visual artist Beeple sold for $69 million. Despite the crypto downturn though, popular NFT collections have held their value. The price on the cheapest NFT in the Bored Ape Yacht Club collection has declined by only 1%, while the crypto market is down as much as 60%.
NFT sales reached $40 billion in 2021 and the 2022 data has already exceeded that figure at $42 billion. But sales in January and February 2022 accounted for more than half of the 2022 total, according to Chainalysis data. The crypto bubble may have popped due to several factors.
The collapse of the Terra stablecoin kicked off the broad crypto downturn in May 2022. Following news that large crypto hedge funds like Three Arrows Capital had exposure to the Terra collapse, crypto lending platforms like Voyager, Celsius, and BlockFi began experiencing trouble. While these troubles have shaken faith in the crypto market, NFTs are likely here to stay.